The ignorance, gullibility, and corruptibility of politicians is legendary though the ages. But when $700 billions are to be spent, they rise to their optimal failure levels with a hand out and a look of serious purpose on their faces.
There's no better time for a massive confidence game than during a bear market and a financial panic. Add in a stormy presidential election campaign between a young lightweight moron and an aging war hero, and it's good to go.
My favorite market and economic analyst in this time of crisis is John Hussmann, both of whose mutual funds, HSGFX and HSTRX, I own:
"However the final legislation is written, the Troubled Assets Relief Program (TARP) being rushed through Congress will evidently be built around its single worst provision, which is that the Treasury will have authority to purchase distressed mortgage securities from U.S. financials......"
"A better approach would be for the government to provide capital directly, in the form of a “super-bond,” in an amount no greater than the debt to bondholders. The “super-bond” would be subordinate to customer liabilities, so it could be counted as capital for the purpose of capital requirements, and would be seen by customers as a legitimate cushion of protection. However, in the event of bankruptcy, it would have a senior claim in front of both stockholders and even senior bondholders. Do that, and you've actually got a mechanism to protect the financial system while at the same time protecting customers and taxpayers. Ideally, the super-bond accrues a relatively high rate of interest so that financials have an incentive to shift to private financing as soon as possible, but you would also defer the interest until the bank meets a minimal level of profitability to make sure that the financing doesn't strain the institution's liquidity."
"But then, Congress didn't do this because nobody thinks in terms of balance sheets....."
This is, as Hussmann and others recognize, what Warren Buffett is doing with Goldman Sachs and General Electric, but the "republic, for which we stand" will waste its assets in corrupt and inconsequential silliness.
Read the whole thing and weep for rationality gone missing.
Recent Comments